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A New Concern for Content Licensors: Perpetual Licensees Deemed to Be Owners
With the tremendous growth of digital media, content such as music, images, books, and software is increasingly distributed pursuant to a license rather than by a traditional sale with a transfer of title. The distinction between a traditional sale and a license can be important, because a “licensee” is not necessarily given the same rights under the Copyright Act as an “owner” who purchases a work and acquires title to it. Two courts in the Ninth Circuit have recently addressed how to differentiate between an “owner” and a mere “licensee” for purposes of rights under the Copyright Act, and have reached decisions that might surprise many practitioners.
Different Rights for an Owner and a Licensee
When a copyrighted work is sold, the intellectual property contained therein remains subject to the full panoply of restrictions of the Copyright Act that, for example, prohibit the purchaser from copying the content or creating derivative works. But the copyright holder no longer has the exclusive right of distribution with regard to the particular copy that was transferred, pursuant to the doctrine of “exhaustion” or “first sale,” codified as 17 U.S.C. '109. This allows a rightful owner of a particular copy of a work to lawfully effect a subsequent sale or transfer of that particular copy. This doctrine has allowed for the development of markets for used books, records, and other goods, as well as allowing intermediaries such as distributors and retailers to sell to customers without explicit permission from copyright holders each step of the way.
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